W Hotel May Need More Cash

Just found this article in the ABJ. Once $128MM in construction financing is spent, Stratus and Canyon-Johnson will need to find additional sources of capital. From a buyer’s perspective, I would want to see that financing in place before entering into a contract.

From StreetInsider.com
“The joint venture is aggressively pursuing other options for financing the future construction costs of the W Austin Hotel & Residences project after the required capital contributions are made. Such options may include additional equity contributions by Stratus and Canyon-Johnson, financing from other financial institutions, admitting new equity partners, or a combination of these alternatives. If the joint venture does not secure project financing from a third-party lender, or if Stratus or Canyon-Johnson is unable to make required additional future capital contributions to the joint venture, the joint venture may be required to delay further construction of the project until additional financing is available. “

Jude Galligan, REALTOR, Principal of REATX Realty and publisher of Downtown Austin Blog (aka. "DAB"), spends his time matching remarkable people with remarkable properties in Austin’s urban core. A resident owner in downtown Austin, Jude serves on the Board of the Downtown Austin Alliance (DAA) and the City of Austin Downtown Commission. Contact Jude.

Comments

I agree that seeking financing from Corus was probably a mistake, i’m sure the rates on the loan were very favorable for them to go that route.

I’m not sure how capitalized Stratus is, but the Canyon Johnson Urban Fund II that owns 60% of the building has around 2 billion in cash so these companies could easily self finance the rest of the building.

I don’t see work stopping at all on this project. They will either self finance or find another lender.

Can’t argue that it fell through on the count of Corus, but when you initial loan was from a bank who was handing out money to anyone doing any investment with the word “condo” in it, who’s next to loan you $$?

Couple this with the fact that other Luxury/W hotel owners (San Diego/Sunstone, etc.) are defaulting on loans and returning the properties to the lenders, who’s going to jump in on this one? Perhaps someone will step up to the plate, but it will probably have to be a pretty sweet deal.

Not saying you’re wrong, or I’m right, but I don’t think it will be easy for them. As a resident of Austin, I hope you’re right.

I believe there is a typo in the article “If the joint venture does not secure project financing from a third-party lender…” should read “When the joint venture does not secure project financing from a third-party lender…”.

I’ve been in living downtown Austin for 3 years now, and recently moved into (rented) one of the newer condos. The building I recently moved is one of the recently built buildings right on the river. Weird thing I’m finding is that the parking structure is maybe 40% full, the building is eerily quiet – even on the weekends. In my two weeks of looking at $1600+ apartments/condos, all of these buildings seemed like ghost towns.

Unless the government starts a “cash for clunker condos” program, I’d place my bets that the W building may be the first big sore thumb that will show that Austin is not immune to the economic downturn.